An information booklet on how to obtain finance if you are self-employed.

1. SELF-EMPLOYED?
AND LOOKING TO BUY OR REFINANCE?

2. *FACT SHEET
Self-employed?
Thinking about buying a house? Refinancing?
Obtaining a home loan, or refinancing your existing, isn’t always easy for self-employed
applicants.
That’s because most lenders and brokers aren’t familiar with your situation. They’re not
used to dealing with tricky applications and they don’t know how to get your loan
approved.
When you’re looking for reliable finance approval, then it’s best to deal with a specialist
mortgage broker you can trust – someone who understands the unique needs of the self-
employed.
As a result, I have put together this fact sheet, so that you can be armed with as much
information as possible, and ask your bank or broker the right questions so that you
know that they are qualified to put together and present your application, so that you get
approved.
* Why?
In my work as a mortgage broker I have come across several self-employed people who
have struggled to get loan approval prior to seeing me. And it’s just not fair. Self-
employed people often work harder than their PAYG counterparts, they contribute to the
economy, and they provide work opportunities for others.
Not only that, regular banks (yes, even the in-house loan writers!) and mortgage brokers
just aren’t interested. It’s too complex – they don’t understand your needs. They put you
in the ‘too hard basket’.

3. * Where do most loan writers and mortgage brokers and lenders
trip up?
Lack of knowledge and understanding
Many brokers and banks don’t understand the flow of money in your business when
there are complex structures with multiple companies and trusts in place.
Double dipping
This is where the broker takes an income or expense into account twice. Again, this due
to a lack of knowledge and understanding of the flow of money in your business.
Procrastination
When a loan is difficult it often gets put in the back of the line for a more ‘convenient’
time.
Insider knowledge
Sometimes your approval will come down to knowing which lenders have a ‘willingness
to approve’ and work with you as opposed to an ‘attitude of declining’ when it gets too
hard.
Presentation
All brokers make use of notes when presenting your application for assessment. Many
brokers don’t know how to present your application in the best possible light and use an
assertive tone. In addition, if your application is packaged neatly and succinctly with all
question marks addressed upfront, it will get approved a lot quicker.

4. * How do banks assess your income?
Most lenders believe that by looking at your past tax returns they can predict how stable
your business will be in the future.
Banks and non-bank lenders alike tend to be very wary if you have an income that has
increased or decreased by a large amount in the last two years.
 One lender may use the lowest of the income figures for the last two years.
 Another may use the most recent year’s income as shown on your tax return.
 Some may even average the two years income.
 Add backs and depreciation can be included, some lender use 50%, some 80% and
some 100%.
As you can imagine all these specifics make a big difference to your loan application!
Importantly, every lender will interpret your tax returns in a different way and may look
at your skills as an entrepreneur, your experience in the industry and the risk profile of
your industry to determine how to assess your income.
Depending on your situation, I may pick and choose which information to provide to help
prove the highest possible income.
I specialise in finding the lender that will look at your application most favourably!

5. * Assessment scenarios
Often, one of the following two ways will be used to assess self-employed income:
Option 1:
BUSINESS IS SHOWING $0 OR GREATER NET PROFIT AMOUNT
No business add backs is used, only the taxable income as per the applicant’s individual
return.
 Business debt and expenses aren’t considered.
This option is by far the simplest, and often the case with sole traders and small
businesses. However, as your company grows and you employ more people, increase
your gross receipts and acquire more equipment, more than likely, the option below will
be your scenario.
Option 2:
BUSINESS IS SHOWING A LOSS AND ADD BACKS ARE REQUIRED FOR SERVICING
Income from the individual tax return is used and all relevant add backs are used to
demonstrate your borrowing capacity.
 If the company has recorded a loss, this needs to be deducted from directors /
borrowers personal income (If the loss is greater than $10,000, this may not be
accepted by the assessor without a satisfactory reason for the loss).
 Any profit will be added to the applicant’s salary amount and taxable income.
 If voluntary superannuation is paid by the company larger than the government
super guarantee rate (currently 9.5%) then this can also be added to the taxable
income for the applicant.
 Business financial debts must be expensed including hire purchases, overdrafts or
margin lending at sensitised rates.
 Interest expense, hire purchase charges, lease fees or depreciation can all be added
together and be divided by 12 for a monthly net (untaxed) add back amount.

6. * Full doc or lo-doc?
Whenever possible, opt for a full doc loan. Full doc stands for full documentation and
means that all your business financials are up to date and that you can provide at least
two years full financials. When this is not possible a lo-doc loan may be your only option.
Disadvantages:
 Higher interest rate
 Higher fees
 Larger deposit required
 Lender’s mortgage insurance is often payable when you borrow over 60% of the
property’s value
 Max LVR (loan to value) is generally 80%.
When would you go for a lo-doc (sometimes referred to as alt doc) loan?
 Your financials are not up to date or you don’t have access to them
 Fluctuating business income
 Your financials are not reflecting the full story

7. * Documents that you need to provide
Banks vary in what they will ask from you in terms of paperwork. It also depends on if
you are purchasing or refinancing, and the LVR or ‘loan to value ratio’ (loan balance as
opposed to house value). In addition to general documentation such a copy of your
driver’s license and bank statements, they will also require:
FOR SOLE TRADERS:
1. 2 years individual tax returns
2. Corresponding notices of assessment
FOR PTY LTD’s:
3. 2 years company tax returns
4. 2 years individual tax returns
5. Corresponding notices of assessment
6. If you have trusts or partnerships, 2 years tax returns for each
7. Profit and loss statements
8. Balance sheets
In some cases, the assessor may also want to see your BAS statements or ask for a letter
from your accountant. Give your mortgage broker or bank direct access to your
accountant, that way they can communicate with each other without interrupting you
every 5 minutes.

8. * 12 Tips and things to think about
 Know the bank policies. Easier said than done, but one of the biggest mistakes is to
think that all banks are the same. All banks have different policies, not just with self-
employed applicants, but in almost every aspect of lending. Your application will be
assessed differently at ANZ to CBA, and there are some banks that simply don’t
handle self-employed applications very well at all.
 Understand how you will be assessed. Ask how the bank will assess your
application. Will they use the lowest of the income figures for the last two years or
will they use the most recent year’s income as shown on your tax return or will
they average the two years income? This is critical information, especially if you are
looking to borrow to your max capacity.
 Research your best options. Don’t just go to the same bank that you have your
business account with. Banks often rely on this convenience factor and therefore
they don’t have to try and win your business –so they won’t offer you the best deal.
 Know your business add-back that will increase your borrowing capacity.
1. Interest expenses
2. Depreciation
3. Car allowance
4. Excess superannuation contributions
5. Non-recurring expenses
6. Non-cash expenses
 Look good. If you know that you are going for a loan, make yourself as attractive to
the banks as possible, and reduce credit card and store card debt wherever possible.
Needless to say, your aim is to go for ‘low expenses – high income’.
 Protect your credit rating. This is crucial. If you go for a business loan, or enquire
about a business loan at some point, make sure you don’t enquire as a private
person but as a business, this way the business accrues the credit enquiry and not
you. Too many credit enquires make banks suspicious and they will think one of two
things, or both:
1. You have been declined, so they will look at your application with even more
scrutiny and possibly fault find. If too many credit enquiries are found your
application may not even get to the assessor; it can be instantly declined upon
submission.
2. Your business is struggling with cash flow.

9.  Consider a home loan product with an attached offset account. The offset account
is a perfect place to store your GST payments before you remit them to the ATO.
You will save a lot on interest paid to the bank and pay your principal loan amount
down quicker.
 Consider your tax. When you are self-employed, it is only natural that you want to
reduce the amount of tax payable. However, if you reduce your taxable income too
much, you also reduce your borrowing capacity. If you are looking at buying or
refinancing within shortly, make sure you get the balance right.
 Get your loan structure right. This is especially important for investors due to the
fact that some interest is tax deductible. If you have the wrong structure, you will
make your accountant’s work a nightmare, and he will charge you a pretty penny for
the extra hours that you put him to work.
 Mind your transaction statements. Do you have a habit of letting your business
account or everyday banking account go into negative? Even a minor blunder of a
few dollars, if it happens regularly, will be looked upon unfavourable. Some banks
hate it so much they can decline on this basis alone. This is another reason why it
can be useful to look beyond your existing bank.
 Stay on top of your GST, BAS and superannuation expenses. Banks are very wary
when there is ATO debt present. If you have fallen behind, make an official payment
plan and provide the statement to your broker. If the ATO debt is hefty, and you
already have a home with equity, you may want to consider to refinance and debt
consolidate, as ATO debt has a high interest rate.
 Be honest with your broker. If using a broker, be as honest and upfront as possible.
Remember they work for you, not the bank, and the more information they have,
the better they can serve you.

10. * What to communicate with your broker
To get the best out of your mortgage broker, communication is key.
Make sure you ask a lot of questions and tell your broker exactly what you are looking to
achieve. Sometimes we feel embarrassed or vulnerable when disclosing our full financial
situation, but a mortgage broker has most likely seen it all, so don’t! It’s imperative that
you are open and honest, that way, your mortgage broker can help you better.
Why is this?
Mortgage brokers won’t look into your credit file unless they find a compelling reason to
do so, and they will only do this after obtaining your permission. If there is something on
your credit file that you haven’t disclosed, they will most likely find out by the assessor
once your loan is submitted, at which point, it can be too late to take corrective action.
If you are completely honest with your broker from the start, he or she can foresee
potential obstacles, address them upfront, or steer you away from lenders that are
sensitive to that particular issue increasing your chances of approval.
What exactly goes on your credit file?
1. Any credit cards that you may have applied for, whether or not you actually
proceeded with them, more than likely, a credit enquiry would have been lodged on
your file.
2. Store cards
3. Furniture bought on credit
4. Car loans
5. Ever made a very general enquiry to a building company? Well guess what? You
probably have an enquiry that looks like a decline to any bank that picks your file up.
6. Enquiries made to debt consolidation companies
7. Will a mortgage broker put a credit enquiry onto my file? Never! A credit enquiry is
lodged on your file by the bank once you go for a loan.

11. * Questions to ask your mortgage broker
 What experience do you have as a mortgage broker?
 What is your experience dealing with self-employed applicants?
 Did you have a good mentor when starting out in the business? A broker with two
years’ experience can be better than someone who has been in the game for 10
years if they had a good mentor.
 What is your process exactly?
 How often will you update me on the progress of my loan? I hate not being kept in
the loop!
 Are you a member of MFAA or FBAA?
 Are you a premium broker with any lender? If so, can you negotiate a better deal for
me?
 Are there any particular lenders that you like to deal with, and why?
 What loan features do you think will suit me as a self-employed applicant?
 On a scale to 1-10 what are my chances of being approved? It’s important that your
broker is honest, and not just say what you want to hear to win the business.
 Do you have any references from existing clients? If a broker is any good the word
gets out!

12. * My Mission
My mission is to assist individuals source the best home or investment loan, tailored to
their specific financial situation, lifestyle and needs.
Element Finance has a modern and streamlined approach designed for the time poor,
FIFO’s and other professionals who simply do not have the time to run around.
I want to help you maximise your cash flow, and put your hard-earned money back in
your pockets.
* My Values
My clients are like family
I have my clients’ best interest through sincere and honourable intentions.
Amaze everyone
I seek to amaze in everything that I do.
Pride
I have confidence in my ability to succeed and quality in the service I provide.
Stay humble, hustle hard
Characterised by performance and commitment to services.

13. * What my clients have to say:
+ Pamela has been excellent! Prompt polite and goes the extra mile. Can't thank Element
enough. Will use them again for the next investment for sure. Many thanks – Barry
Scholtz
+ Pamela, was fantastic when it came to switching banks for our home loan, because we
are self-employed it was a bit more time consuming, but Pamela was amazing and went
above and beyond my expectations. Thank you so much Pamela – Tanya Dodd
+ We used Pamela at Element Finance for the purchase of our first home in Australia. She
was nothing short of excellent. Of course we knew nothing of the process or terms
involved in buying a house but Pamela always treated us with respect and always
explained everything clearly. Nice to know the ‘small fish’ are treated the same as the big
ones! Thank you Pamela for guiding us, we are ever so appreciative. – Miki Mulqueen
+ A big thank you for Pamela sorting my finance stuff, she has been awesome.
– Ian Reader
+ Pam you are the best! - Ram and Sabita Shrestha
+ I have known Pam for some time now and she is very professional and dedicated to her
job as a Mortgage Broker. When we got our permanent residency Pam was instrumental
in arranging my mortgage for my new property here in Australia. The whole process was
streamline and went with no problems. I would highly recommend anyone looking for a
mortgage to reach out to Pam and her Team at Element Finance. Thanks again Pam – Roy
Webb
+ Brilliant work, as usual, Pamela! You are our Financial Goddess! – Terezina Brooks
+ Pamela went above and beyond, she is professional, helpful, and friendly, we have been
nothing but impressed… Thank you so much Pamela. – Tanya Dodd
+ I have known Pamela Palmqvist for a period of 4 years & from my view she seems to
work in a most diligent manner to secure the most appropriate business for her particular
clients’ needs. But most importantly her follow up during the process from initial contact
to settlement is excellent and extremely professional. – Mark Brophy
+ I sell real estate for a living and I emphatically recommend the services of Pamela
Palmqvist. She has detailed knowledge of complex lending criteria and her ability to find a
suitable lender for her clients within efficient times are incredible. I recently used Pamela
to organise finance for a client who had been told no by their bank, and was very pleased
that Pamela could seek out an alternative solution. Keep up the amazing work! - Andrew
Stone

14. + Fantastic service and we wouldn’t have done it this quick without using Pamela. -
Dorien Copejans
+ I found Element Finance Mortgage Broker (Pamela) delivered beyond my expectations.
Very happy client! Keep up the good work! - Myra Oudendijk
Self-employed?
Thinking about buying a house? Refinancing?
Get in touch today!
Pamela Palmqvist, Mortgage Broker for Element Finance
p: 0413 820 709
e: pamela@elementfinance.com.au